EU regulator objects to current Telefonica, KPN deal: sources

People are reflected as they walk past Spanish telecom group Telefonica's flagship store in central Madrid November 8, 2013. REUTERS/Sergio Perez

By Foo Yun Chee

BRUSSELS (Reuters) - The European Union antitrust regulator objects to Telefonica's proposed 8.6 billion euro ($11.83 billion) bid for KPN's German unit in its current form, two people familiar with the matter said on Tuesday.

The deal, which will reduce the number of mobile providers in Europe's biggest market from four to three, is crucial for the European telecoms industry, which is keen to build up scale via consolidation and better compete with bigger U.S. peers.

The European Commission's objection to the deal as it stands would likely lead to the offer of concessions from the German unit of Spain's Telefonica.

The Commission, the EU's executive body, opened an in-depth investigation into the deal in December last year, saying it was concerned the takeover would reduce competition in Europe's largest economy and lead to higher prices for consumers.

"The next step is a statement of objections to the companies," said one of the people, referring to a Commission document which sets out the regulator's demands in order for the deal to be approved.

A third source said the Commission will likely send the document to the companies next week.